Treasury's War Read online

  The tools were now in place—it was time to use them.

  The whole US government—in particular, the FBI and the CIA, which had been responsible for tracking and stopping Al Qaeda—felt under the gun to uncover the networks tied to 9/11 and those who might be poised to strike again. The FBI established the Financial Review Group (FRG), led by a veteran financial investigator, Dennis Lormel, to direct terrorist financing investigations stemming from the 9/11 attacks. The FRG, which attempted to bring together the best financial investigators in the US government to trace the credit cards and bank accounts of the 9/11 hijackers, would later be converted into the Terrorist Financing Operations Section (TFOS). Lormel would lead the effort within the FBI to integrate financial analysis and investigation into counterterror investigations, something that was not embedded in Bureau culture.

  For Jimmy Gurulé, the former federal prosecutor and new Treasury Department undersecretary for enforcement, this meant leveraging Treasury’s historical law-enforcement agencies to discover and disrupt suspect money trails. These Treasury agencies had deep expertise in a variety of financial, criminal, tax, and money-laundering investigations and worked closely with the FBI in the field. The Secret Service’s early work right after 9/11 uncovered the hijackers’ credit-card transactions, leading to the initial confirmation of some of the hijackers’ identities. Customs had some of the best anti-money-laundering investigators, with its history of going after corrupt bankers and banks globally. The history of the Treasury agent, with Eliot Ness, who took down Al Capone with tax evasion charges, as a model, was to use financial criminal investigations to take down big targets.

  Gurulé and his onetime boss as US attorney in Los Angeles, Rob Bonner, the commissioner of customs and former administrator of the Drug Enforcement Administration (DEA), saw the need to set a new direction for Treasury law enforcement in the post-9/11 era. On October 25, 2001, Treasury announced, along with Assistant US Attorney General Michael Chertoff, the establishment of Operation Green Quest, a Customs-led Treasury investigative effort that would focus on illicit and suspect money flows. Green Quest was led by a tough-as-nails Customs veteran, Marcy Foreman, and began to pursue wide-ranging financial criminal cases with possible terrorism connections. Gurulé wanted a notable terrorist financier brought to justice, and he wanted Treasury to get that done. Green Quest sought to “augment existing counter-terrorist efforts by bringing the full scope of the government’s financial expertise to bear against systems, individuals, and organizations that serve as sources of terrorist funding.”16 The two task forces, one established under the FBI and the other under Treasury’s authority, along with their leaders, would clash repeatedly as law enforcement focused on terrorist financing investigations.

  Early on in the process, Secretary O’Neill made clear how aggressive he wanted the Treasury to be in using its new authorities. Treasury had been granted emergency powers to be used to help thwart the next attack and to dry up Al Qaeda’s funding. These tools were intended to arrest assets, not people, and to paralyze entire networks that were being used to funnel money into terrorist coffers. It was a preventive tool—not a prosecution—and we were targeting networks, not just criminals. In one meeting shortly after Executive Order 13224 was signed, O’Neill looked at the small group of us who were assembled and said, “We’re applying the 80/20 rule.”

  In decisionmaking and business circles, the 80/20 rule popularizes the law of diminishing returns by encouraging workers to make decisions with 80 percent of the information rather than spending increasing time and energy to get the additional 20 percent (which may or may not be helpful). This meant that we needed to have 80 percent surety that our targets were legitimate. O’Neill was willing to live with some uncertainty and imperfection in the early days after 9/11 to ensure the effective and aggressive use of the powers the president had delegated to him. He did not want to engender a “paralysis by analysis” process. There was nothing legally problematic with this standard, as the secretary was authorized to take action when he had a reasonable basis upon which to believe that the evidence fulfilled the criteria contained in the executive order.

  With focused intelligence and law-enforcement collection and analysis, there quickly emerged a set of targets and networks tied to Al Qaeda. Some of this work had been done prior to 9/11, but there had been little focus and no clear strategy for taking action against these Al Qaeda supporters. This analysis led to a picture of an Al Qaeda that relied on a steady flow of cash to generate the money needed for recruitment, training, sustainment and pensions; alliance formation and support with other groups; and influence operations and propaganda. Bin Laden leveraged the old Sunni extremist mujahideen support network and sympathetic donors for his recruitment and training efforts, promising fulfillment for pledges to support Al Qaeda’s jihad against the United States, Israel, and the apostate regimes. Al Qaeda took full advantage of deep-pocket donors from the Arabian Gulf and the Islamic charitable sector to raise and move money. Its leaders sold their cause as holy, just, and obligatory under Islamic law.

  They also relied on front companies—much like the Mafia—to generate and move funding. Speculation ran rampant that Al Qaeda had invested money in blood diamonds from West Africa prior to 9/11 in anticipation of a global crackdown on bank accounts.17 This allegation turned out to be unprovable, as did speculation that Al Qaeda had shorted investments in US airline stocks in anticipation of the economic effects of 9/11. Even so, the terrorists did use every possible means to move money—and these means often involved banks and money-service businesses, cash couriers, or traditional hawaladar brokers and traders.

  The aggressive use of designations as a preventive tool could expose these means and methods of funding, but could also cause tension with our international partners. The challenge inherent in this financial tool was that we were applying an emergency administrative power against terrorist financing like a net. This net was being placed over targets to stop flows of funds, but proving that every node or member of these targeted groups was criminally culpable would be impossible. As Secretary O’Neill had dictated, we were operating under the 80/20 rule. Our European partners and conventional law-enforcement agencies relied on a standard of proof beyond a reasonable doubt, whereas we were relying on a “reasonable basis to believe” standard. To freeze assets, we had to have a reasonable basis upon which to believe the funding could be headed into terrorists’ hands or for their support.

  The tension between these two standards of proof emerged vividly in our shutdown of the Al Barakaat network. Al Barakaat was an international remittance system founded in Somalia in 1986 to allow Somali expatriates to send remittances to their homeland, a nation with no formal banking system and a nonexistent governance structure. Al Barakaat eventually grew into a large international network of remitters, money-service businesses, and traditional hawaladars in more than forty countries, including the United States and several European countries.

  Millions of dollars were coursing through Al Barakaat’s network every year—mostly from innocent Somali expatriates remitting money to their relatives in Somalia. Intelligence analysis uncovered that the network was being controlled in Somalia by a savvy extremist businessman named Ahmed Jumale. Jumale and those close to him not only profited from the system but sent some of the proceeds to Osama bin Laden and Al Qaeda. Most of those remitting money had no idea this was happening, and elements of the money remittance operation around the world were certainly innocent of connections to Al Qaeda and would not be subjects of criminal prosecutions. But this did not mitigate the need to shut down the network.

  In Treasury we made the decision to take the whole system down. On November 7, 2001, the Office of Foreign Asset Control designated the entire network, along with Jumale, and seized $1.1 million in the United States. The Treasury Department argued that Jumale had siphoned millions of dollars from Al Barakaat, with some 10 percent of global revenues going to Osama bin Laden and Al Qaeda.18

/>   In January 2002, three Somali Swedes who were involved in the Swedish branch of Al Barakaat petitioned their government and the UN Security Council to be removed from the list. This triggered a Swedish government action to the UN Security Council to create a standard of evidence for future terrorist financial designations. Anna Lindt, the popular Swedish prime minister who was later killed by an assailant while shopping, paid the Treasury Department a personal visit in early 2002 to discuss this issue directly with Secretary O’Neill. The Swedish—and other Europeans—were very uncomfortable with a noncriminal standard when people’s reputations and livelihoods were on the line. This was a legitimate concern, but we did not want to hamper our ability to freeze assets quickly. The administrative power to use targeted sanctions would have been significantly weakened by requiring a criminal process for each designation.

  However, we also knew that there would have to be a credible delisting process attached to the UN’s Resolution 1267 designation process for Al Qaeda and Taliban sanctions if we were to maintain the ability to use these sanctions for the long term. Under US law, individuals have the right of administrative appeal as well as the right to challenge the designations in federal court. Indeed, the onus was on the individual to challenge the government’s assertions and actions, and there was a recognized set of procedures for doing precisely this.

  Eight individuals tied to the Barakaat network availed themselves of that right, successfully demonstrating that they were not tied to the terrorist financing that concerned US officials, and they agreed to dissociate themselves from the money remittance network. In August 2002, the United States removed US-based remitters in Minneapolis and Columbus, Ohio, as well as two of the three Somali Swedes. Many saw the delistings as an admission by the government that we had made a mistake in casting the Al Barakaat designation net too broadly. This was not the case. It was a misreading of what happened built on the expectation of criminal legal standards. There had never been a claim that these individuals were criminally culpable or even knowledgeable of the terrorist financing and support to Al Qaeda that had taken place through the money-transfer services. The designation and delisting process had worked and achieved its purpose.

  Secretary O’Neill’s 80/20 rule had been our guiding principle. O’Neill had wanted us to push hard in using the designations publicly to attack the networks and individuals supporting Al Qaeda and other terrorist groups. This was a standard he would repeat to me, to his lawyers, and to others involved in the designation process. And for a time we followed that rule. Nevertheless, it would become an impossible standard to keep, given the concerns over litigation and diplomatic blowback, and within a year the 80/20 rule was no longer in effect. The need for 100 percent surety soon became apparent.

  Shortly after 9/11, the White House established a National Security Council policy coordination committee (PCC) specific to terrorist financing to ensure coordination among the various actors in the US government. PCCs—now called “Interagency Policy Committees”—are policy groups of senior representatives from around the government charged with helping to shape and guide US policy. They feed their decisions and key questions to the deputies and principals of the US government who deal with the specific area of policy under the PCC’s consideration. Aufhauser ran the PCC with a recognition that the designations by Treasury were drivers of the anti-terrorist-financing campaign—in part because they were public actions by the US government and drivers of UN action—but also that other actions could be taken to stop or deter terrorist financing. Over time, the number of designations and amount of assets frozen became markers for the success of the war on terror. They were concrete figures that spoke for themselves. Unlike other aspects of the war on terror—which were often kept secret—Treasury actions could be discussed publicly.19

  In early 2002, Cofer Black, director of the CIA’s Counterterrorist Center (CTC), paid Treasury a visit. It was the first time Black had set foot in the building, and he had expected to see “green-eye-shaded accountants walking the halls” when he entered the main gates. He was coming there to meet with Gurulé, Newcomb, and me to discuss a set of proposed designations that would encompass targets of interest to the CIA. He was there on a mission—to protect intelligence sources and operations that could be revealed with a planned Treasury designation.

  We met in Gurulé’s office on the fourth floor of the Treasury building on a corner facing south and west. There was a wonderful view of the White House and the South Lawn, especially in the winter when the leaves had fallen off the elms and oaks. In front of us was a large analyst’s map that laid out the network we planned to designate. There were dozens of individuals, companies, and institutions that formed the web of the Al Taqwa network, based in the Bahamas, Switzerland, and Liechtenstein. Al Taqwa had ties to Yousef Nada and Ahmed Idris Nasreddin, alleged terrorist financiers, and other suspect individuals. The designation plan was ambitious, but it reached too far into the CIA’s operational equities.

  Black started simply and respectfully. He appreciated the work that Treasury was doing, but explained that there were operations underway in Europe to uncover Al Qaeda cells and support. Some of these operations were in Milan and had ties to some of the designation targets on the map. Black motioned to a large swath of targets and pointed to a number of entities that were under CIA watch and the subject of CIA action. Black was asking us to stay away from naming those targets. There was no reason to challenge Black. His presence and his explanation in Gurulé’s office gave great weight to the CIA’s objections. We talked about the possible timing of the CIA’s actions and the possibility of future designations, but the conclusion was clear. The meeting ended cordially with the decision to scrap the designations that would complicate the CIA’s operations in Europe.

  Indeed, the growing complexity of US counterterrorism efforts worldwide made such meetings inevitable. A small group of CIA, FBI, State, Defense, Treasury, and White House actors began to meet separately in late 2002 in the back of the old White House Situation Room to coordinate operational activities. The Treasury actions—which were outing known terrorist supporters and networks—needed to be coordinated with the clandestine and covert operations underway around the world.

  Treasury’s strategy for designations aimed at targeting networks of key financial actors and nodes in the terrorist support system. The point was not necessarily to freeze assets in US banks—though this was a benefit—but instead to use the designations by the United States and the United Nations to make it harder for individuals who were financing terrorists to access the formal financial system. Our analyses therefore focused on the networks of actors and institutions providing the financial backbone to terrorist enterprises. Interestingly, we found that there were all-purpose financiers who would give to multiple causes—”polyterror” supporters.

  These meetings also provided a way for the CIA and the FBI—along with the Department of Defense—to be more open about their operations. It was a space where the wisdom of public designations could be debated without reservation and the tradeoffs for delayed exposure could be discussed. Often, the operators asked me to back off from pushing designations; in return, we pushed for deadlines and assurances that disruptions and operations would actually occur.

  Even with these tensions, the CIA and the Treasury Department often made common cause. Soon after we began our outreach to banks and countries, we were hoping to find evidence of Osama bin Laden’s riches in bank accounts or shell companies he controlled. But bin Laden was less connected to the international financial system than most people assumed. Once he declared war on the Saudi monarchy, he was cut off from his family’s wealth, and after he left Sudan, his businesses and operations were expropriated by the Sudanese government. He would encounter difficulty running businesses from the hinterlands of Afghanistan.

  We did find one bin Laden account in a Pakistani bank. Bin Laden’s name was on the account, and there was a modest amount of money in it. The Pakistani
government froze the account and passed information about it to us. We tried for months to get a financial forensics team into Pakistan to look at the account in depth—we wanted to see the history of transactions, the contact information, and anything else that might prove helpful. It became an issue of great sensitivity, including with our embassy in Islamabad. Ultimately, we did not send in a team, but tried to acquire the information through other sources.

  We also started to learn more about Al Qaeda’s money man, Sheikh Said, the nom de guerre of the Egyptian accountant who was responsible for the organization’s books. He was Al Qaeda’s chief financial officer. Sheikh Said was a trusted confidant of both bin Laden and Ayman al-Zawahiri, and he managed the organization’s finances like a hawk. He was stingy with Al Qaeda’s budget—requiring expense reports and receipts from key lieutenants—and would often be angered by sloppy recordkeeping and cost discipline. He set out rules for the operational budget, with requirements for approval from him and Al Qaeda headquarters before major expenditures could be made.

  Sheikh Said was the man Al Qaeda relied upon to help make hard budget decisions. The organization was now under pressure, with diminishing resources and dwindling flexibility to move money around the world. Said would make sure that the family members of Al Qaeda fighters would be paid—with insurance-like benefits for senior members killed in the fight against the United States and its apostate allies. The price of this line item was rising quickly, and the sources of funding were beginning to dry up.